SM Energy Company SM today announces that its Board of Directors has
approved a capital expenditure budget for 2013 and provides 2013 production
and cost guidance.
Tony Best, CEO, remarked, “Our 2013 capital program positions the Company for
another year of record production while generating strong returns from our key
projects. The capital budget is anchored by our high return Eagle Ford and
Bakken/Three Forks development programs, with additional investments being
made in emerging oil programs in the Permian Basin. Our production mix will
continue to shift from lower value natural gas to higher value liquids
throughout the year. We'll exit next year with a solid balance sheet and with
quarterly capital expenditures equaling quarterly EBITDAX assuming current
strip prices. We expect to grow production by 20% in 2013, followed by annual
production growth of approximately 15% in 2014 and 2015 with improving
leverage metrics and no equity dilution. With our solid multi-year drilling
inventory, visibility of production growth, and strong financial position, it
is an excellent time to be a shareholder of SM Energy.”
2013 Capital Investment Budget
The breakdown of the capital budget is provided in the following table:
2013 Capital Expenditure Budget
($ in MM)
Eagle Ford (1) $650
Bakken/Three Forks $290
Operated Permian $170
Operated Granite Wash $45
Operated other $20
Non-operated other $25
Drilling and completion subtotal $1,200
Non-drilling capital (2) $175
New Ventures activity $125
Non-program subtotal $300
TOTAL $1,500
(1) This amount is net of carried costs for the non-operated Eagle Ford
program.
(2) Includes capitalized overhead, facilities, G&G, and land.
Eagle Ford
SM Energy plans to operate five drilling rigs, supported by two dedicated frac
spreads, on its operated Eagle Ford shale acreage in 2013. Most of the
Company's activity next year will be focused on swath drilling in the northern
portion of its Galvan Ranch acreage and the eastern portions of its Briscoe
Ranch acreage. Swath drilling allows wells to be drilled at optimum spacing
and mitigates complications associated with attempting to drill and complete
infill locations later in field life. The Company expects to complete
approximately 75 flowing completions during the year, with an additional 40
wells waiting on completion at year-end.
SM Energy forecasts its non-operated Eagle Ford shale net production to
increase by roughly 5% per quarter throughout 2013.
Bakken/Three Forks
Bakken/Three Forks activity next year will be focused on SM Energy's Bear Den,
Raven, and Gooseneck prospects. SM Energy will operate approximately 80% of
the capital allocated for the program and plans for approximately 40 flowing
completions in the operated portion of this program in 2013. The Company will
enter 2013 with four operated drilling rigs, however, efficiencies associated
with pad drilling will allow completion of this program averaging 3 ½ rigs for
the year.
Operated Permian
SM Energy plans to operate two drilling rigs in its operated Permian
Mississippian program in 2013, with approximately 12 flowing completions
planned for the year. One operated drilling rig is scheduled to work on Bone
Spring projects in southeastern New Mexico, with six flowing completions
planned for 2013. SM Energy will operate substantially all of its capital
investments in the Permian Basin in 2013.
Production and Cost Guidance
Based on the capital budget and program discussed above, the Company
anticipates full year 2013 production to range from 255 to 267 BCFE (699-732
MMCFE/d), which represents a 20% annual increase over 2012 at the midpoint of
next year's guidance. The Company expects to exit 2013 producing within a
range of 769 to 808 MMCFE/d with a mix of 50% natural gas, 29% oil, and 21%
NGLs. This production growth profile is weighted to the second half of the
year and reflects the timing of previously contracted firm transportation
agreements in the Company's operated Eagle Ford shale program.
Preliminary cost guidance for 2013 is summarized in the table below:
LOE ($/MCFE) $0.82 - $0.87
Transportation ($/MCFE) $0.80 - $0.85
Production taxes (% of pre-derivative oil, gas, and NGL 5%
revenue)
G&A – Cash ($/MCFE) $0.41 - $0.45
G&A – Cash NPP ($/MCFE) $0.05 - $0.07
G&A – Non-cash equity compensation ($/MCFE) $0.09 - $0.11
Total G&A ($/MCFE) $0.55 - $0.63
DD&A ($/MCFE) $3.20 - $3.40
Liquidity
Based on current strip prices and the capital budget and program described
above, the Company expects to exit 2013 with a debt to trailing twelve month
EBITDAX ratio of approximately 1.6 times.
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